The COVID-19 outbreak is likely to deliver a severe blow to the South Korean economy, especially in the retail sector and real estate investments, according to global real estate service provider Cushman & Wakefield.
Asia’s fourth-largest economy’s growth prospects in the near term will be affected as the fast-spreading coronavirus disrupts supply chains, reduces exports and weakens consumer sentiment, the company said in its recent report on the Asia-Pacific region.
“Concerns are mounting for offline retailers in the face of reduced footfalls, as well as the office market,” said Philip Jin, head of research at Cushman & Wakefield Korea.
The brick-and-mortar retail market has been hit hard, amid reduced footfalls at malls and mounting concerns over vacancy, the report noted.
Several department stores and large discount stores here have mandatorily closed temporarily, after confirmed carriers of the coronavirus were reported to have visited them. Duty-free stores are set to see a sharp decline in sales with the reduced number of visitors, especially from China.
Reflecting such downside effects, the Oxford Economics earlier cut its gross domestic product forecast for Korea this year to 1.8 percent from the earlier 2 percent.
“Due to guest cancellations and a general unwillingness to venture out, hotel reservations are plummeting, but the real problem is the anticipated sharper drop in future reservations,” the report said.
While the cancellation rate at major hotels in Seoul is reportedly close to 15 percent, the reservations by Koreans in Jeju Island’s Seogwipo is likely to plunge 30 percent on-year in March.
Even real estate investment trusts -- REITs -- that were conventionally considered a leading safe asset are now susceptible to negative impacts, as key portfolio properties may be facing quarantine.
As for China, the region’s largest economy and the place of origin of the new coronavirus, the commercial real estate market will be the most disrupted by the epidemic. Taking a more tangible impact in the short term, however, will be the tourism and retail sectors, according to the report.
Cushman & Wakefield, founded in 1917 in London and currently headquartered in Chicago, is a comprehensive service provider for real estate owners and occupiers. With 400 offices in 70 countries, the company logged $8.2 billion in revenue as of 2018.
By Bae Hyun-jung (
tellme@heraldcorp.com)
